Direct answer
In forex, balance is the value of your account based on closed trading activity (and deposits/withdrawals). Equity is your account value after including the effect of open positions, meaning it changes as market prices move.
Explanation: how they are calculated
Balance
Balance is an accounting-style number that represents what the account is worth without considering unrealized results from open trades. Practically, it is driven by:
- starting funds and any additions/withdrawals
- realized profit or loss from positions that have been closed
Because it excludes open-trade revaluation, balance typically changes more slowly than equity.
Equity
Equity represents your account’s current total value using a mark-to-market idea: unrealized profit or loss from open positions is added to (or subtracted from) the balance. Conceptually:
- Equity ≈ Balance + Unrealized P/L
So equity can rise or fall even if you do not close any trades, simply because the current market price differs from the price at which open positions were entered.
Where “free margin” fits (a related but different number)
Many platforms also show margin and free margin. While exact formulas vary by broker/platform design, the common distinction is:
- Equity: overall current value including unrealized results
- Free margin: the portion of equity not currently locked for margin requirements
This matters because losses can reduce equity and, indirectly, reduce free margin.
Example checks to distinguish the two
Assume your balance is 1,000 after all closed trades.
- If you open a trade and it is currently up by 50 (unrealized), your equity is roughly 1,050.
- If the trade is currently down by 80, your equity is roughly 920.
If you then close the position, the unrealized profit/loss typically becomes realized and is reflected in the updated balance. At that moment, balance and equity tend to converge (though platform presentation can differ).
Limitations and risks (what can’t be inferred)
- Numbers depend on how your platform computes unrealized P/L (for example, valuation methods, instrument specifics, and any commissions/fees treatment).
- Balance does not reflect open-trade risk; equity does, because it moves with price.
- Fast price moves can change equity quickly, so equity alone does not predict future outcomes.
- Avoid interpreting balance or equity as guaranteed safety: they are accounting snapshots that can change moment to moment as open positions are repriced.